Utilities, consumer advocates at odd over regulatory changes

Saturday

Mar 19, 2011 at 12:01 AMMar 19, 2011 at 7:02 PM

SPRINGFIELD -- A controversial bill that would change the way Illinois sets utility rates in order to create incentives for companies to upgrade their electric power and gas lines is still alive, its sponsor said, but changes are being negotiated.

DOUG FINKE

SPRINGFIELD -- A controversial bill that would change the way Illinois sets utility rates in order to create incentives for companies to upgrade their electric power and gas lines is still alive, its sponsor said, but changes are being negotiated.

Rep. Kevin McCarthy, D-Orland Park, said he will use the upcoming one-week break in the General Assembly’s schedule to try to draft a compromise to House Bill 14 that will allow lawmakers to consider the bill in early April.

“We’re hoping we can at least satisfy enough of the opposition to move forward,” McCarthy said. “Hopefully, we’ll have a package we can move forward in early January.”

But finding that compromise is going to be difficult.

“We’ve seen those changes. They make something horrible less horrible, (but) the attorney general still objects,” said Paul Gaynor, chief of the public interest division for Attorney General Lisa Madigan.

The objections from Madigan and the Citizens Utility Board are that the bill lacks protections for consumers and could lead to automatic annual rate hikes. On its website, CUB says the legislation “would essentially gut the regulatory system that’s been in place for nearly 100 years and replace it with one with much less oversight and automatic, yearly rate increases.”

Faster cost recovery

Utilities say the change would let them more quickly recover their costs of upgrading utility infrastructure.

“The formula-rate methodology proposed in House Bill 14 will provide more timely recovery of costs to serve customers and provide more certainty to investors and lenders,” said Craig Nelson, senior vice-president for regulatory affairs at Ameren Illinois, in prepared remarks to General Assembly committees reviewing the bill.

Ameren and Commonwealth Edison are two of the largest utilities that would be covered by the change.

The bill, he said, continues oversight of rate increases by the Illinois Commerce Commission.

But the proposed system changes how that oversight takes place.

Now, investor-owned utilities prepare a rate hike request and submit it to the ICC. It takes 11 months of review and comment before a decision is reached. Even then, there is no guarantee the utility will receive the entire increase it requested.

Supporters of the current system say the delay gives time to thoroughly study whether a rate hike should be granted and, if so, how much it should amount to. The present system also forces utilities to operate efficiently because they don’t collect a rate hike while it is under consideration by the ICC, they say.

The proposed changes would allow rate hikes to go into effect in as few as 45 days, according to CUB. Rates would be set by a complicated formula that allows for automatic increases.

“We think it’s too much of a change,” said Tim Anderson, executive director of the Illinois Commerce Commission.

Anderson said the ICC wants utilities to improve their infrastructure, but said, “There may be ways to do those we are more comfortable with.”

McCarthy said the issue is “whether the technology could be done in the old rate-making process, as opposed to this new formula rate. My belief is it can’t. I think we’ll be taking that investment off the table if we try to stay with the current system.”

Nelson said Ameren will invest $950 million in its electric and natural gas systems over the next 10 years if the legislation is approved. The improvements would add about $5 a year to customers’ bills, Ameren said.

Utilities, including Ameren, say adoption of the plan would both improve infrastructure and create jobs. Ameren said it will result in 750 jobs during its peak construction period.

Gaynor notes, though, that that figure includes jobs Ameren said would otherwise be eliminated.

The utilities say the upgrades will improve safety and reliability of the systems. The power companies, for example, could install meters where the company can directly read usage. They also would automatically pinpoint outages, allowing the utility to more quickly respond. Utilities say such technology also can help customers monitor their usage with an eye toward conservation.

There are questions, though, about the effectiveness of the equipment. A pilot program is under way now in the Chicago area, but a report on it isn’t due until later this year. Gaynor said the state should wait until the study is completed before overhauling regulatory laws.

Ameren disagrees.

“It is essential this passes as soon as possible,” said spokesman Leigh Morris. “The system doesn’t get any younger. We’d like to get started as soon as possible.”